Ladies and gentlemen,
I am pleased to be with you this morning, and let me express my gratitude to our Chairman, Mr Bruce Gracie.
This is a particularly important meeting of the Council Working Group on Financial and Human Resources, with important budgetary and human resource issues to be discussed ahead of Council in May and Plenipotentiary Conference in October.
ITU management has always been strongly in favour of financial transparency, and we are proud to have been certified IPSAS-compliant for our 2012 financial statements – for the third year in a row.
The draft Financial Plan for 2016-2019 has been prepared on the basis of PP-10 Decision 5, and its associated guidelines. Actual spending over previous years has been taken into account to ensure that the financial plan is as realistic as possible.
It is my intention, as Secretary-General, to propose that the contributory unit be maintained at the current level of 318,000 Swiss Francs.
This was done at PP-10, and would be a good basis for discussion of the Financial Plan for all Members in good faith, allowing adequate preparation before PP-14.
The Financial Plan is linked to the draft Strategic Plan for 2016-2019, and thus provides a basis for setting the strategic objectives and priorities in terms of financial levels.
By a revised Decision 5, on Revenue and Expenses for the Union for the period 2016-2019, PP-14 is expected to establish the framework and the directives for the two biennial budgets for 2016-2017 and 2018-2019.
Concerning the revenue side, the main assumptions are:
- 1. Assessed contributions from Member States, Sector Members, Associates and Academia are based on actuals at 31 December 2013 (345 units for Member States). Assessed contributions from Sector Members and Associates have fallen from 47.0 million Swiss Francs in 2008-2009 to 33.8 million Francs in 2014-2015; and this is the base for 2016-2019;
2. Cost recovery revenue to remain constant.
- 3. No withdrawal from the Reserve Account is foreseen in the draft Financial Plan.
It should be noted that the amount of the contributory unit decreased from 334,000 Francs in 1997 to 318,000 Francs in 2006-2007; and has remained unchanged since then.
Ladies and gentlemen,
Concerning the expenses side, the main assumptions are :
- 1. Extrapolation of the approved budget for 2014-2015 for the 2016-2019 financial period, adjusted for the programme variations.
- 2. Programme variation showing the number of main conferences included in the draft Financial Plan.
- 3. Staff cost calculations that include the actual cost forecast of each post, step increments, replenishment of repatriation fund, cumulated leave, installation costs and increases in education grants and health insurance contributions, and possible variations in the conditions of service applied in the United Nations common system.
- 4. Financial resources for medium- and long-term maintenance or replacement of ITU buildings. The replacement of the Varembé building is anticipated.
- 5. Financial resources for the replenishment of the ICT Capital Fund.
- 6. Financial resources for long-term liabilities such as: After Service Health Insurance, ASHI; repatriation grants; and accrued annual leave. Steps need to be taken to gradually cover these requirements and the current negative net assets of the Union which amounted to 228 million Swiss Francs at 31 December 2012.
The difference between forecasted revenue and expenses in the draft Financial Plan shows a shortfall of 60.5 million Swiss Francs.
This is the first draft Financial Plan, and ITU management is working hard to reduce the remaining shortfall between revenue and expenses, by identifying efficiency measures as well as additional revenue.
We have launched an internal SharePoint to receive any suggestions on new efficiency measures from staff members. Any ideas from Member States and Sector Members are also of course most welcome in order to balance the Financial Plan.
My intention is to arrive at a balanced financial plan before Council meets in May.
Efficiency measures are currently being implemented across all sectors and departments. These include paperless systems; the automation of processes; the external hosting of ICT commodity services; improvements in travel cost management; and improvements in the procurement system.
From last year, a reduction in the staff parking subsidy took effect, and the parking subsidy was eliminated entirely in January, resulting in further savings in expenses; this amounts to the equivalent of cost of about three professional posts.
Additional savings are envisaged when travel requests are submitted at least 20 days prior to departure, in order to take advantage of the lowest non-flexible air ticket costs. This is expected to generate savings of around 20% on the annual budget for official travel.
Following the UN Secretary-General’s recent announcements, we have also brought ITU policy in line with UN policy concerning travel, and this will result in further significant savings for the Union.
Further measures contributing to the funding of ASHI include the increase in retirement age from 62 to 65 years old for new staff joining the Union from the beginning of this year, as well as the identification of alternative solutions to the current Staff Health Insurance Fund, SHIF.
We have also proceeded with a limited number of early separation packages, on a case-by-case basis, where this was beneficial for the Union, and where the staff members concerned are not going to be replaced.
Ladies and gentlemen,
The replacement of the existing Varembé building will allow ITU to save the very significant maintenance and repair costs for the old building, which have totalled more than 10 million Francs since 2001.
Much more would be required for future upkeep. For instance more than 30 million Francs would be needed for the obligatory façade replacement – and the net result of renovation to the existing structure would still be a building that is not fully compliant with current standards for new buildings.
FIPOI’s technical experts have assessed the existing building and the project vision, and have concluded that demolition and replacement is the appropriate strategy.
The adoption of IPSAS has resulted, inter alia, in the recognition in the financial statements of the total liability for long-term employee benefits payable to active and former staff members.
In the absence of reserves dedicated to the absorption of these costs, the ASHI long-term liabilities constitute the main part of the negative net assets of the Union.
Health insurance costs, which are shared between active staff members, retirees and the ITU, have risen considerably over the years, mainly because of the increased population of retirees; higher average life expectancy; and the rise in actual and expected medical costs in Switzerland.
Actuarial projections show that the ASHI liability will continue to grow over the next 10 years.
The following measures are under consideration and constitute the basis of a long-term plan to gradually cover the unfunded obligation:
1. Half of the negative net assets are expected to be covered by:
An increase in the discount rate (based on the long-term evolution of market yields on government bonds);
Reducing the related obligation through optimized cost containment and monitoring of the claims, and adapting, if needed, the current benefits;
Increasing the retirement age increase to 65;
And ensuring effective balance in the pay-as-you-go coverage in the mid-term, by increasing the contribution rate of active staff, retirees and the ITU. The base contribution rate was 3.3% in the 2012-2013 budget, 3.91% in the 2014-2015 budget, and is settled at 5.16% in the 2016-2019 Financial Plan, in line with actuarial studies which have been conducted.
2. The other half of the unfunded obligation is expected to be covered by the progressive constitution of an ASHI Reserve Fund in the ITU Accounts:
Council decided to create such a Fund at its 2013 session, and to make a first payment of 4 million Francs from the Reserve Account.
An annual payment of 2 million Francs is included in the draft Financial Plan.
A percentage of any future ITU regular budget surpluses could also be allocated to the ASHI Reserve.
Finally, let me stress of course that voluntary contributions are most welcome to support the ITU in covering the unfunded obligation.
Ladies and gentlemen,
By implementing the above measures, the current ITU liabilities would be significantly reduced if not entirely covered within a 50-year period.
The evolution of the ASHI liability will be carefully monitored. Should the coverage of the negative net assets be reached within a shorter timeframe than planned, the contribution rate and annual payment into the ASHI Reserve Account will be revised and decreased accordingly.
The construction of the new Varembé building would also contribute to reinforcing ITU’s overall assets in the long-term.
Let me close on this subject by reminding the meeting that the financing of ASHI is common to many UN organizations, and the High-Level Committee on Management, HCLM, has identified the need for a common approach to the funding of growing ASHI liabilities within its Priority Issues for 2013-2016.
As it is a sensitive issue, a concerted approach for all UN organizations is advocated in order to define a long-term solution acceptable for ASHI participants as well as for the Organizations themselves and the Member States.
This meeting will also include discussions of the ongoing implementation of the Human Resources Strategic Plan, and will update the Council Working Group on the implementation of Resolution 48 (Rev Guadalajara).
Let me highlight some of our current challenges.
HR issues are at the heart of improving ITU staff engagement and performance through modernizing processes and policies.
Our HR Department has been very busy with these objectives, and has been actively participating in inter-agency discussions on HR issues.
As an example, we are deeply involved in the Comprehensive Review of the UN common system compensation package, launched by the ICSC in March 2013.
This review is examining all elements of staff compensation, and will propose a new system that is coherent and sustainable. It must also address the concerns and expectations of all of its stakeholders, including staff, organizations and Member States, in terms of streamlining and simplification and cost containment. At the same time, it also needs to maintain a reasonable level of attractiveness for a highly technical organization such as ITU.
Another important challenge is gender balance.
After the new ITU Gender Equality and Mainstreaming policy (GEM) was approved by Council last year, I approved an action plan, which is now being implemented.
Actions directly related to HR will be implemented aimed at enhancing the gender balance at all levels (G & P) through the intensification by HRMD of outreach activities in order to attract qualified women to employment opportunities in ITU.
These actions will be supported by the implementation of Gender Guidelines to be elaborated for recruitment, staff management, programme management, communication, and training actions such as a basic gender mainstreaming web-based training.
Finally, let me address staff well-being and welfare, which has always been of paramount interest to management.
Regarding the provision of medical insurance, following a request from the ILO to review the financial foundation of the joint ILO/ITU Staff Health Insurance Scheme, I have taken the decision to separate from that scheme.
A Working Group – comprising officials from HRM, FRM and LAU, as well as the elected representative of the ITU insured – is working on the implementation of a new medical plan, as an alternative to the ILO/ITU Staff Health insurance Scheme.
This will help raise awareness on the efficient use of health care and provide similar services.
The working group is also reviewing the current arrangements, with the objective of identifying and implementing a plan that allows for proactive cost management.
Ladies and gentlemen,
Let me close by saying that our main driver in achieving the maximum level of satisfaction for our various stakeholders remains the delivery of the best possible value from ITU’s human and financial resources.
And on that note, let me leave you in the capable hands of our Chairman, and let me wish you a productive and successful meeting.